Expert answer:Compensation Plan Outline
Answer & Explanation:Compensation Plan OutlineUsing the same company you
researched in Assignment 1, evaluate the company’s compensation plan to
determine how it could be improved.Write a six 6 page
paper in which you:
Evaluate the existing compensation plan to determine if it is the most
appropriate for your company. Explain your rationale.
Determine the most beneficial ratio of internally consistent and market
consistent compensations systems for the company you selected.
Evaluate the current pay structure used by your company and assess the
recognition of employee contributions.
Make two (2) recommendations for improving the effectiveness of the
discretionary benefits provided by the company you selected.
Evaluate the types of employer-sponsored retirement plans and health
insurance programs provided by the company you selected and compare them to that
company’s major competitors.
Use at least three (3) quality references. Note: Wikipedia and other
Websites do not qualify as academic resources.Your assignment must
follow these formatting requirements:
Be typed, double spaced, using Times New Roman font (size 12), with one-inch
margins on all sides; references must follow APA or school-specific format.
Check with your professor for any additional instructions.
Include a cover page containing the title of the assignment, the student’s
name, the professor’s name, the course title, and the date. The cover page and
the reference page are not included in the required page length.bus409_ass1.docx
bus409_ass1.docx
Unformatted Attachment Preview
Running Header: WELLS FARGO COMPENSATION PRACTICE Page |1
Wells Fargo Compensation Practice
Compensation Practice
Alondra Buelna
Janine Przybyl
October 31, 2015
WELLS FARGO COMPENSATION PRACTICE
Page |2
Wells Fargo Compensation Practice
Wells Fargo is a public traded company (S&P500) founded in the New York City of
United States in 1952. It mainly deals with banking: online and both physical, applying for
mortgages, investment, and insurance services. It is the largest bank worldwide, its founder
Henry Wells and William Fargo formed Wells Fargo to provide banking services quickly and in
an efficient manner (http: //www.WellsFargo.com., 1976) in 2014, it reported a revenue of
US$ 84.3 billion, operating income of US$ 33.9 billion, profit of US$ 23 billion, assets of US
$ 1.69 trillion and total equity of US $ 184.3 billion which was an increase from the previous
year. Wells Fargo has a slogan that,” Together We’ll Go Far.” (WellsFargo.com, 2015). It is a
merger between San Francisco Wells Fargo based corporation and Minneapolis Based Norwest
Company. It is one of the ‘big four’ financial institutions of the United States. In 2014, it was
named the most valuable bank brand (Forbes, 2014).
Wells Fargo has various compensation strategies. For the executives, there is a nonqualified benefits plan, which enables them to save for retirement. There is also an executive
bonus, which includes a cash bonus or purchase of investment for the worker directly. This
bonus is taxed on the employee. In addition to this, there is an executive life insurance plan
where its main aim is to protect their families in case of premature death. There is also a
competitive strategy for their employees as well as food and residential areas. Wells Fargo is
known to have the best practices worldwide. One is that they value customer feedback and make
changes when necessary. They do this by administering questionnaires and surveys to know the
weak areas in their organization. They have incorporated customer feedback into the corporate
portal and apps community banking, Wells Fargo is well known for its endeavoursactivities. It
provides the most reliable and quick banking services worldwide. Wells good leadership skills
WELLS FARGO COMPENSATION PRACTICE
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have enabled it to be the best and most valuable mortgage lender and real estate agent worldwide.
It also compensates its workers well making it everybody’s company of choice (McNeil, 1994).
However, Wells Fargo faces a couple of challenges when paying its workers. First and
foremost is providing a competitive pay rate to have a competitive edge over other banks in the
United States of America. Also, there is a challenge of attracting high-skilled employees and
maintaining the responsibility to collect revenue in the form of taxes to influence the economy.
Its compensation pay rates for employees are also stagnant over the previous years making it a
challenge to affect a good compensation plan. Technology is also dynamic and has been
changing rapidly over the past couple years making it difficult for Wells Fargo to effect these
changes in the compensation plan. They also face security law issues relating to compensation
awards. Privacy of workers information when being compensated is also compromised, this
makes the employees fear to give out honest information. The employees must also authenticate
their data at pay point, but they fear that it may be compromised. There may be ghost workers
who are being paid out of the company’s profits, but this is slowly diminishing (Martochio,
2013).
Good compensation practices entail retaining what is rightfully yours and paying what
are rightfully others (Lipman, 2008). Paying workers on time results to a positive impact of the
company in that it enables Wells Fargo to gain reputation and attract more potential employees.
Giving bonuses to exemplary employees also has a positive impact on the company and thus
makes it a world-leading firm that values employee output. Being the best-paying company will
attract more prospective investors and shareholders who in turn finance the company increasing
its net worth and goodwill. This will also improve Wells Fargo credit rating since it follows all
the compensation practices. Wells is also known to give good compensation awards to
WELLS FARGO COMPENSATION PRACTICE
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employees who provide high standard and high-quality work. Due to its diverse tasks it offers to
its employees, Wells Fargo offers tasks to employees where they have skills and expertise. This
can be done through a division of labor and specialization where one is best suited (Lawler,
1990).
Negatively, paying workers has decreased the firm’s profits since they have to pay out of
the company’s profits. Wells Fargo has also spent a lot of money on worker’s incentives and
later receiving fewer returns. This may jeopardize the company and make it have losses at the
year-end. If Wells Fargo does not meet employee expectation on being given compensation and
bonuses, they may become angry and lose morale. This may make them not to complete the
assigned tasks resulting into losses in Wells Fargo. Making workers do the right thing at the right
time consistently is also a major problem. Some employees have to be supervised delaying the
work completion process. Poor communication with employees may make the compensation
practice fail. This is because there may be misunderstanding on what they should do to get
compensation and receive bonuses. Wells Fargo compensation plan strategy may be
underdeveloped if not undeveloped. This is because it did not take into account what may make
the company succeed. Another challenge is that there is no such thing as ‘best practices’. This is
because workers may work hard, but their hard work may not have an effect on the profitability
of the company. The compensation plan or practice may be ineffective. This is because workers
may not follow this practice consistently leading to failure of the profitability goal. They may not
evaluate workers well. This is a painful process and may decrease employee’s morale and selfesteem (Lawler, 1990).
Laws influence how much a person should be receiving or at what range a company
should pay its employees. Wells’ laws on compensation are the jurisprudence it follows in
WELLS FARGO COMPENSATION PRACTICE
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setting up compensation plans. The federal state of The United States sets how much a particular
individual will be receiving and how much he or she will be taxed. It also determines how many
employees will work in a public traded company. Many employees imply lower pay. There are
also laws on how much expertise and experience a person in Wells Fargo can have to complete a
job task. Higher experience implies that they will be paid more. Senior workers are paid more as
compared to junior workers as set by Wells’ laws and regulations and that of the federal state
(Allen, 1977).
A labor union is a group of people in a committee that set the laws of workers and how
they should be paid and their standard pay. They have laws that ensure workers have the right to
organize, form, join or assist in using collective bargaining. Collective bargaining is where
employers and employees negotiate on good working conditions and advocate for better
payments. Labor unions have enabled workers’ wages to be increased. This is because they set
the standard of how much each employee should be paid. They have also encouraged pension
plans for individual employees. This has been due to collective bargaining agreements favoring
employee pension plans. Wells Fargo has in the past been able to reduce the number of jobs it
offers to employees. Trade unions try to impose restrictions on the firing of workers and
safeguard workers interests by assuring them of job security. Labor unions have also gone to the
extent of forming strikes for pay rises for their employees. Trade unions have also tried to reduce
wage inequalities between workers of the same category by raising wages for low-income and
middle-income earners than that for high-income earners. Labor unions also advocate for in
fringe benefits. These are benefits like paid leave, per diem and the like. Members of a trade or
labor union are likely to receive these benefits as compared to those who are not members of a
particular trade union. Labor unions have also given workers generous and enormous health
WELLS FARGO COMPENSATION PRACTICE
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benefits by covering them under the health insurance plan. Workers in a labor union receive
better retirement pension schemes. They also receive more vacation time and more paid leaves
(Allen, 1977).
Market factors can be categorized as internal or external factors. Internal factors are
those factors that occur within an organization and will influence the ability of Wells Fargo to
compensate its workers. For Wells Fargo to be successful, it must be able to pay its workers at a
competitive rate. In this way, it will be able to attract potential workers with high skilled
expertise who will be able to increase operational efficiency. The number of employees in Wells
Fargo will also influence what a particular employee is to be paid. Since Wells Fargo has a lot of
employees, there will be a decrease in the average pay per individual. The amount a person must
also receive depends on the performance of a given task. Higher performing employees receive
more than lower performing employees do. Higher performing employees also get a lot of bonus
schemes as compared to lower performing employees. The amount an employee shall also
receive depends on the level of his experience. More experienced employees receive more as
compared to employees with lower experience. Where employees are given an opportunity to
make their decisions, they are paid according to the decisions they make. This in turn will
influence creativity and morale in given tasks (Allen, 1977).
External market factors include labor market, which determines how much a person
should receive. Forces of demand and supply also influence he rates one should receive. When
Wells Fargo is in demand of labor, the supply of payments will be at its high level while when
demand for labor is minimal, supply for payments will be low. Another factor is competition.
The way other companies in the same industry view Wells Fargo comparative to its competitive
edge also determine how many individuals should receive in that company. As Wells Fargo in
WELLS FARGO COMPENSATION PRACTICE
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our scenario here has a higher competitive advantage than other firms in the same industry,
employees are likely to be paid better as compared to those other firms (Allen, 1977).
Traditional base pay depends on seniority and merit. Top management in Wells Fargo is
paid more as compared to lower management. There are some effective ways for Wells Fargo to
implement traditional base pay. This is a very effective method since employees are paid
according to the amount of work was done and the quality of work done. Senior employees are
more rewarded as compared to juniors. High-quality work is more rewarded as compared to
low-quality work. It offers consistency on work and what is perceived as fairness. Wells Fargo
also pays its employees according to competency in a particular field of interest. Higher-skilled
employees are paid more reducing cost of training employees. Wells Fargo paying employees
according to the amount of work done is also directly related to output and its effect on the
company. High paid employees increase the performance of the company. In conclusion, Wells
Fargo should incorporate better compensation practices and plans to improve employee morale.
Increased employee morale results to higher performance of tasks resulting in higher profitability
index for the company.
WELLS FARGO COMPENSATION PRACTICE
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References
Wells Fargo Bank. (1976). Wells Fargo & Company. San Francisco: The Department.
Available at http://www.WellsFargo.com. Retrieved on 29thOctober 2015
McNeil, B.J., & West Publishing Company (1994). Nonqualified Deferred Compensation Plans.
St. Paul, Minn: West Pub. Co. retrieved on 29thOctober 2015
Allen, R.E. (1977). Factors Influencing Compensation of A 2-year College Alumni: A
Multivariate Analysis. Laramie: Institute for Policy Research, University of Wyoming.
Retrieved on 29thOctober 2015
Lip man, F.D., & Hall, S.E. (2008). Executive Compensation Best Practices. Hoboken, N.J:
John Wiley & Sons. Retrieved on 29thOctober 2015
Lawler, E.E (1990). Strategic Pay: Aligning Organizational Strategies and Pay Systems. San
Francisco: Jossey-Bass Publishers. Retrieved on 29thOctober 2015
Martochio, J.J (2013) Strategic Compensation: A Human Resource Management Approach.
Boston: Pearson. Retrieved on 29thOctober 2015
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